Trust me, I'm a regulator. Lord Turner, chairman of the Financial Services Authority, today gave a technocrat's answer to the burning issue of the hour – how do you deal with the problem of banks that have become too important to fail?

Turner's answers include: apply higher capital and liquidity ratios to big, important and inter-connected banks; maybe allow international banks that are organised as clean constellations of national entities a discount to acknowledge the relative ease with which they could be wound down; certainly slap higher capital ratios on banks that wish to engage in risky trading activities; and make all these institutions draw up wills.

In other words, it's all about the intelligent application of incentives to make banks change their behaviour – and, yes, maybe even transform their structures.

The last point can be read as a nod to Mervyn King, governor of the Bank of the England, who is rightly raging about how little real reform we have seen in the banking sector. My way, Turner seemed to say (but never quite made explicit), could achieve many of the changes you desire. For example, it might become so costly (in terms of tied-up capital) for banks to run internal hedge funds that they choose to spin off these operations. That is not a forced break-up of banks, as King would like, but could be considered a close cousin – encouragement to simplify and fragment.

Turner's approach scores well in terms of practicality. It should, in theory, be easy for regulators to impose capital and liquidity thresholds. All they have to do is agree the ratios and monitor compliance. That does indeed sound more straightforward than pulling these institutions apart from outside.

The long-term effects might also be powerful. Turner produced an interesting graph showing how large banks have been allowed to operate with lower capital ratios than smaller banks in the past. This "reward for sophistication" flowed from regulators' crazy belief that size and diversification led to reduction of risk. By taxing size and importance, Turner's proposal would reverse the error: it might work.

But there is a difficulty. Do we really trust regulators to get their sums right? Turner has shown he can bark but can be bite? How high will the FSA and other regulators set the new capital and liquidity ratios? There was no clear answer beyond "quite a lot higher". As Turner acknowledged, the work is at the "methodology and procedures" stage.

That is why you would struggle to find a bank chief executive who sounds frightened. Barclays, for example, does not seem worried that investment banking could soon become a highly expensive game to play: it is busy expanding Barclays Capital as fast as it can rather than contemplating demerger.

We shall see. For better or worse, Turner's philosophy of prodding via incentives, rather than King-style coercion, is the approach governments prefer. In practice, both methods are probably capable of producing the deep reform that is urgently needed to prevent another banking crisis.

But both require governments to stand up to the inevitable squeals from banks if Turner & Co live up to their promises to be strong. It is that part of the plot where the outside world remains sceptical.

It is also why the big bonus battle is important. Turner says the "priority" use of banks' current taxpayer-assisted profits must be higher capital cushions, not bonuses. Think of that as round one of an ongoing fight: Turner must prove he can win it.

Tears in the beer

That's all right then: there is healthy competition in the pub market, says the OFT; drinkers enjoy good prices and the interests of tied tenants and their landlords are aligned. Should we raise a glass to this happy state of affairs?

Well, no. It is clearly true that consumers can find cheap beer. JD Wetherspoon, which runs only managed houses, led the way, pricing Greene King beer at 99p, so it is easy to understand why the OFT finds few reasons to worry. The problem lies in believing the tenants of the big pub companies are getting a reasonable deal – a question that falls outside the OFT's direct remit. The contrast between the personal fortunes made by the managements of Enterprise Inns and Punch Taverns and the miserable existence of some tenants is striking.

Everybody here is a consenting adult, so abolition of the tie was always unlikely. But too much money has been taken out at the top of this industry and too little invested at the bottom. There is some evidence that the pubcos now see the problem – but don't expect this issue to disappear soon.